Financing & Leasing in Accounting Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Page 1

Question 1 1. Why might a business choose trade credit over other forms of short-term financing?

Question 2 2. Kevin is an investment banker who wants to wine and dine with prospective clients. He may not have all of the cash he requires to pay. Why should he use a credit card?

Question 3 3. Which of the following is the best explanation of short-term financing?

Question 4 4. Which type of credit involves the bank allowing a borrower to borrow money on an as needed basis up to a preset maximum?

Question 5 5. Barry takes out a 12 month loan from a bank to buy some new office equipment. The bank requires that Barry put up the equipment he is purchasing as collateral. What type of credit arrangement is involved?

Page 2

Question 6 6.

You're handed a lease with the following lease terms:

1) 10-year lease term with a bargain option to renew for another 10 years. Useful life of the asset: 25 years.

2) Leased asset returns to the lessor at the end of the lease if the bargain option is not used.

3) Fair value of the lease payments is $200,000. Fair value of the leased assets is $225,000.

If you wanted to make sure that this lease would be treated as an operating lease, what changes would you recommend?

Question 7 7. Why would a business owner enter into a capital lease instead of an operating lease?

Question 8 8. Given what you now know about capital leases, which of the following would you expect to have a lot of leased assets that could potentially qualify as capital leases?

Question 9 9. What distinguishes a capital lease from an operating lease?

Question 10 10. Which of the following terms in a lease WOULD NOT result in capital lease accounting treatment?

Page 3

Question 11 11. Which of the following costs is NOT included in a TCO calculation?

Question 12 12. According to Kelley Blue Book, why is it that two cars with the same purchase price can have different values for total cost of ownership?

Question 13 13. For which of the following items should you calculate the total cost of ownership before deciding to purchase it?

Question 14 14. Which of the following companies should lease an airplane rather than purchasing one?

Question 15 15. Kelly is trying to decide whether she can afford to purchase a house or not. She can only spend $2,200 each month on the house. Which of the following houses can she afford? Use total cost of ownership.

Page 4

Question 16 16. Which of the following BEST defines long-term financing?

Question 17 17. John is the owner of a small IT company. In exchange for a financial investment, he gave his friend Katerina 10% of the company. This is an example of what type of financing?

Question 18 18. Why are government grants considered the cheapest form of long-term financing?

Question 19 19. What type of financing involves investors becoming creditors?

Question 20 20. How is a secured loan different from an unsecured loan?

Page 5

Question 21 21. Which criteria is NOT one of the requirements to account for a lease as an operating lease?

Question 22 22. Which of these transactions is most likely to receive operating lease accounting treatment?

Question 23 23. What entry is posted for a transaction accounted for as an operating lease?

Question 24 24. Which transaction is LEAST LIKELY to be treated as an operating lease?

Question 25 25. Why might a company enter into an operating lease?

Financing & Leasing in Accounting Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

Association of Legal Administrators CLM Exam: Study Guide  /  Business Courses
Support